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The Distribution of Environmental Damages

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  • Solomon Hsiang
  • Paulina Oliva
  • Reed Walker

Abstract

Most regulations designed to reduce environmental externalities impose costs on individuals and firms. A large and growing literature examines whether these costs are disproportionately borne by different sectors of the economy and/or across different groups of individuals. However, much less is known about how the environmental benefits created by these policies are distributed, which mirror the differences in environmental damages associated with existing environmental externalities. We review this burgeoning literature and develop a simple general framework for empirical analysis. We apply this framework to findings concerning the distributional impacts of environmental damages from air pollution, deforestation, and climate change and highlight priorities for future research. A recurring challenge to understanding the distributional effects of environmental damages is distinguishing between cases in which populations are exposed to different levels or changes in an environmental good and those in which an incremental change in the environment may have very different implications for some populations. In the latter case, it is often difficult to empirically identify the underlying sources of heterogeneity in marginal damages because damages may stem from nonlinear and/or heterogeneous damage functions. Nevertheless, understanding the determinants of heterogeneity in environmental benefits and damages is crucial for welfare analysis and policy design.

Suggested Citation

  • Solomon Hsiang & Paulina Oliva & Reed Walker, 2019. "The Distribution of Environmental Damages," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 13(1), pages 83-103.
  • Handle: RePEc:oup:renvpo:v:13:y:2019:i:1:p:83-103.
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    File URL: http://hdl.handle.net/10.1093/reep/rey024
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    8. Jasper N. Meya, 0. "Environmental Inequality and Economic Valuation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 0, pages 1-36.
    9. Garg, Teevrat & Gibson, Matthew & Sun, Fanglin, 2020. "Extreme temperatures and time use in China," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 309-324.
    10. Sager, Lutz, 2019. "Income inequality and carbon consumption: Evidence from Environmental Engel curves," Energy Economics, Elsevier, vol. 84(S1).
    11. Drupp, Moritz A. & Meya, Jasper N. & Baumgärtner, Stefan & Quaas, Martin F., 2017. "Economic inequality and the value of nature," Economics Working Papers 2017-08, Christian-Albrechts-University of Kiel, Department of Economics.
    12. Costa, Francisco J M & Forge, Fabien & Garred, Jason & Pessoa, João Paulo, 2020. "The Impact of Climate Change on Risk and Return in Indian Agriculture," SocArXiv yxzfu, Center for Open Science.
    13. Malvina Bondy & Sefi Roth & Lutz Sager, 2020. "Crime Is in the Air: The Contemporaneous Relationship between Air Pollution and Crime," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 7(3), pages 555-585.
    14. Marshall Burke & Vincent Tanutama, 2019. "Climatic Constraints on Aggregate Economic Output," NBER Working Papers 25779, National Bureau of Economic Research, Inc.
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    18. Mullins, Jamie T. & White, Corey, 2020. "Can access to health care mitigate the effects of temperature on mortality?," Journal of Public Economics, Elsevier, vol. 191(C).
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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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